ERC adopts new Guidelines to adjust Generation Rates
The Energy Regulatory Commission (ERC) approved in its regular meeting on October 13, 2004 the Guidelines on the Automatic Adjustment of Generation Rates and System Loss Rates by Distribution Utilities (DUs). The automatic adjustment will be on a monthly basis and will replace the Generation Rate Adjustment Mechanism (GRAM).
The shift to a new mechanism in determining generation rate adjustment addresses the delays posed by the application for and review of revised generation charges as required by the guidelines on GRAM. The new mechanism will assure consumers that they are paying for the true cost of electricity since any change in the generation cost will immediately be reflected in his bill. A consumer will be able to easily track on a monthly basis the changes in cost items pertaining to generation cost such as fuel, foreign exchange and IPP costs. Moreover, the consumer is spared from paying carryings costs effectively lowering the generation cost component of his bill. DUs, on the other hand, will recover immediately any adjustments in the generation cost so as not to interrupt their cash flow.
Consumer advocate Raul T. Concepcion, Chairman of the Consumer and Oil Price Watch, earlier expressed his preference for a monthly instead of quarterly adjustment of the generation rate. He noted that the GRAM does not reflect the price situation at the time the rate is granted by the ERC. He further observed that the consumer is paying a carrying charge or interest based on the 91-day Treasury Bill rate plus three percentage points under the present adjustment scheme.
In addition, ERC has also instituted the automatic adjustment of System Loss Rates which is not included under GRAM. This adjustment mechanism will also benefit both the GENCOs and electricity consumers alike. It will allow electricity providers to immediately recover adjustments in system loss subject to the prescribed cap while consumers will realize earlier the savings associated with system loss rate improvement.
“The Commission realizes its obligation to help industry participants maintain a viable posture for them to continue providing electricity end-users with quality, safe, reliable, adequate and efficient electricity service,” ERC Chairman Rodolfo B. Albano, Jr. said. “ERC assures the electricity consuming public that under the new scheme, the generation charges remain as a pass-on charge and is not meant to generate additional revenue for the distribution utility who merely acts as a collector of this charge,” the ERC chief added.
Guidelines for the Automatic Adjustment of Generation Rates and System Loss Rates by Distribution Utilities (10/13/2004)
October 14, 2004